Thursday, November 17, 2016

What Americans Can Learn From Brexit

Forty-eight hours before Donald Trump was declared winner of the U.S. presidential election, it was, as the great Yogi Berra quipped, “déjà vu all over again.”

On the eve of the June 23 Brexit referendum, international markets and British bookmakers had concluded that Britain would remain in the European Union and markets and bets rose significantly despite some fairly close polling data.

The so-called “establishment” – government officials, leaders in the private sector, pundits and analysts – felt confident that the illogic and irrationality of leaving the EU would overcome emotion, lies and empty promises they believed fueled the “Leave” campaign. On the day of the referendum, turnout was high across the UK, yet another sign that its people would vote to remain.

As the early referendum results began to trickle in, they did not follow the predictions based on polling data. Markets began to sense change, the pound dropped precipitously and bookmakers rapidly re-assessed their odds. Although commentators remained hopeful that more populated and predictable districts could turn the tide, it never happened.

This pattern repeated itself in the United States on election night, with the exception that the U.S. polling data was off by much more significant margins than it was for Brexit. The common factor was that the establishment simply never believed it could happen.

For those who are unsure of what will happen in the United States over the coming weeks and months, it’s instructive to watch how the UK has fared over the five months following its shocking referendum, and draw some lessons about what to expect in America after Donald Trump’s stunning victory.

Genuine shock: Do not underestimate the profound emotional shock that the establishment is experiencing at a time when everyone is looking to them for answers on how this could have happened and how things will work in the future. This will take some time to process. Establishment voices are putting a brave face on things, but their statements are brief because they are so stunned that they don’t know what to say.Real anger: As soon as they regain the ability to form words, establishment anger will kick in and it will be visceral. In the UK, this anger focused on then-Prime Minister David Cameron’s recklessness at holding the referendum in the first place and then executing a poorly run campaign; it was the Labour Party’s political absence throughout the campaign (which led to a leadership challenge that ultimately failed); it was the fault of ignorant people who didn’t even know what they were voting about; it was the lies told by the Leave campaign.

In the United States, there will be soul searching on polling and data-driven models; the wrong candidate; the role of the media; Russia’s suspected interference in the election and the FBI’s mismanagement of Hillary Clinton’s private email server investigation. For Clinton supporters, grief will eventually give way to anger.Powerful denial: This is the most surprising result of Brexit after nearly half a year has passed: the establishment’s deep denial of an outcome it continues to view as illogical and self-injurious. Many members of the Remain campaign still believe that Britain will never actually leave the EU. Others are working to ensure Brexit fails – as leading British political figures call for a second referendum hoping to overturn the results of the last one – rather than accept a new reality and help make Brexit as successful as possible. The continued anti-Trump demonstrations in the United States speak to a strong desire for a “do-over” as well.A flummoxed establishment: Denial or not, the UK establishment simply does not know how to proceed. Since 1973, British officials have worked toward greater integration with the EU. Forty-three years of effort have now been rejected. What now? Help tear it down and join the Department to Exit the EU? Hope that the economy stumbles and jobs flee the UK so that those who supported Brexit change their minds? Keep pushing for the same immigration policies and hope no one notices? Five months after Brexit, many in the UK establishment are still unsure of what to do.

But in spite of the shock and denial among those who wanted to Remain, there are positive elements to consider.

Doomsday scenarios have not come to pass: Although many predicted post-Brexit catastrophe, it hasn’t yet happened. In fact, the British economy is doing reasonably well despite all the uncertainty. The depreciation of the pound will boost British exports and make some British firms attractive to outside investors. Changes in industrial policy may help diversify the British economy despite looming questions about international trade and the future of the British financial sector.Agents of change meet institutional reality: Members of the Leave campaign who made the case that exiting the EU would be quick and allow 350 million pounds per week ($436 million) to be diverted to the National Health Service now confront bureaucratic and institutional reality. As Trump will soon discover, he and his future administration are bound by checks and balances, laws and institutions. Brexit is entering this balancing act now as parliament seeks to have greater say on the government’s EU negotiations.It is time to listen and rebuild trust: In both the UK and the United States, a now-rejected establishment needs to stop talking about “interpreting” the voters’ message and begin to listen and make necessary adjustments to government policies on trade and migration. Repeatedly ignoring these messages has brought the establishment to this difficult political moment.A cry for renewal: Elections and referendums are exercises in validating the direction of a country or demanding a course correction. For many years, democratic societies have rebelled against the relentless pace of globalization and rapid social change that the policies of an entrenched establishment have encouraged, to no avail.

The challenge for both Brexit and the U.S. presidential election is that half the population validated the status quo while the other half completely rejected it. But despite these deep societal divisions, elections should be viewed as a source of needed democratic renewal. As shocking as it may be, this is what Brexit and Trump’s election represent.